RBI Imposes Monetary Penalty on Rajkot Peoples Co-operative Bank Ltd.

The Reserve Bank of India (RBI) imposed a monetary penalty of Rs.1.00 lakh (Rupees one lakh only) on “Rajkot Peoples Co-operative Bank Ltd.”, Rajkot (Gujarat) (the bank) for violating RBI’s directions on “Loans and advances to directors, relatives, and firms/concerns in which they are interested” in an order dated January 18, 2022. This penalty was levied in accordance with RBI’s authority under Section 47A(1)(c) read with Section 46(4)(i) and Section 56 of the Banking Regulation Act, 1949, in light of the bank’s failure to follow RBI’s instructions.

This action is based on regulatory compliance issues and is not meant to be a judgement on the legitimacy of any transaction or agreement between the bank and its customers.

Background

The statutory inspection of the bank conducted by the RBI with reference to the bank’s financial position as on March 31, 2019, the Inspection Report pertaining thereto and examination of all related correspondence revealed, inter alia, that the bank had granted loans to relatives of one of its directors, resulting in contravention of aforesaid directions issued by the RBI. In furtherance to the same, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed for contravention of the aforesaid directions issued by the RBI. After considering the bank’s reply to the notice and oral submissions made during the personal hearing, the RBI came to the conclusion that the aforesaid charge was substantiated and warranted imposition of monetary penalty.